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World Bank on Indonesia’s state of affairs: Indonesian economy could grow higher than 5%

World Bank Chief Economist in Indonesia, Frederico Gil Sander, said that the Indonesian economy could grow higher than five percent through the support of a number of structural improvements.

“The Indonesian economy can have more potential by removing a number of obstacles,” Gil Sander stated in a presentation in Jakarta on Thursday.

He noted that structural improvements must be carried out to encourage productivity and growth, especially in the trade and investment sectors.

These improvements include encouraging improvements in the investment and export climate and protecting business activities from unfair competition.

In addition, it provides clear regulatory and legal certainty as well as energy policies that do not burden the current account balance.

“This effort must also be supported by investments in `human capital` and infrastructure to make the economy progress and grow better,” he added.

The latest Indonesian Economic Quarterly Report states that Indonesia`s economic growth in 2018 and 2019 is estimated to reach 5.2 percent, respectively.

This growth is supported by strong domestic demand as well as investment and export activities.

There is a risk from Indonesia`s economic growth projections, as there are still global trade tensions and a tightening cycle of monetary policy from the Central Banks in developed countries.

However, Indonesia can escape the negative impact of global turmoil if it has sound macroeconomic fundamentals, supported by strong coordination of fiscal policy, monetary, and exchange rates.

The World Bank is projecting Indonesia`s economy to experience 5.2 percent growth in 2018 and 2019. By 2020, the institution said Indonesia`s growth would accelerate to 5.3 percent.

The largest economy in Southeast Asia, has charted impressive economic growth since overcoming the Asian financial crisis of the late 1990s. The country’s GDP per capita has steadily risen, from $857 in the year 2000 to $3,847 in 2017. Today, Indonesia is the world’s fourth most populous nation, the world’s 10th largest economy in terms of purchasing power parity, and a member of the G-20. An emerging middle-income country, Indonesia has made enormous gains in poverty reduction, cutting the poverty rate to more than half since 1999, to 9.8% in 2018.

Indonesia’s economic planning follows a 20-year development plan, spanning from 2005 to 2025. It is segmented into 5-year medium-term plans, called the RPJMN (Rencana Pembangunan Jangka Menengah Nasional) each with different development priorities. The current medium-term development plan – the third phase of the long-term plan – runs from 2015 to 2020. It focuses on, among others, infrastructure development and social assistance programs related to education and health-care. Such shifts in public spending has been enabled by the reform of long-standing energy subsidies, allowing for more investments in programs that directly impact the poor and near-poor.